Don’t rage about your gas bill this winter, but shout at your MP about the
need for a realistic long-term energy strategy

Just when we thought inflation had been quelled — the Consumer Prices Index having halved from its recent peak above 5 per cent — along come 6 per cent tariff increases from British Gas, and almost 9 per cent from npower. Afflicting more than 11 million households in time for the first frosts, on top of near-record petrol prices and rising food bills after a bad harvest, this dismal news confirms the fear that living costs are about to bite us in the backside again. And the elderly will suffer most.

The hikes have also provoked a hunt for someone to blame: these days, anything unwelcome to the consumer is seen as a conspiracy of greed. Len McCluskey of the Unite union talked of “money from the poor going to [British Gas parent] Centrica shareholders” and called the rises “shameful abuse by out-of-control fuel companies, sitting on piles of profit”. But that’s hard-Left hogwash: investors are entitled to returns, and utility companies’ safe-but-dull shares are widely held by pension funds. Far from being “out of control”, this is an intensely regulated industry. British Gas profits, though 23 per cent up for the last half-year, are not extreme — £60 to £80 a year per household customer — and the pay of Centrica chief executive Sam Laidlaw is no more excessive than that of most FTSE 100 bosses.

Nor do Britain’s “big six” energy suppliers operate a “cartel”, as critics have suggested. There’s no surprise they move more or less as a pack, given links between tariffs and global gas price swings over which they have no control. They all reduced prices in January when global supply was plentiful, but one, E.ON, promised to freeze them until the end of the year, which it probably regrets. It will be gaining new customers now, however, because the smart move is to switch to a supplier with a better offer. The domestic energy market is transparent, websites such as uSwitch do the comparisons for you, and fixing your tariff for a year or more ahead is a modest gamble given that the long-term trend is likely to be upwards.

And that’s the nub of this issue. Leaving aside “peak oil” scaremongering, we must accept that carbon fuel supplies will remain permanently volatile as global demand continues to rise. Our own North Sea nest egg is running out, but even if it wasn’t it would still be affected by global price trends — determined as they are by the threat of conflict in Iran on shipments of liquefied petroleum gas from the Gulf, by President Putin’s cold hand on pipelines from Russia to Europe, by rising energy use in emerging industrial nations, and by events such as the earthquake which caused the 2011 Fukushima disaster.

The response that is needed is, first, major investment in national grid and gas storage facilities, so that short-term fluctuations in wholesale markets can be absorbed and domestic tariffs don’t have to be loaded to protect against them. For that, suppliers need steady profits to reinvest.

More important, the electricity generating industry has to get its act together. Its regulator Ofgem warns that the nation could face black-outs by 2015 for lack of new capacity. Old coal-fired and nuclear plants are being decommissioned, but little is coming on stream to replace them. The only large-scale solution is new nuclear, but the Treasury won’t underwrite the risks and potential investors are walking away. Shale gas may help, but is a long way from commercialisation in the UK. Meanwhile, ministers witter on about wind turbines, those absurdly inefficient tokens of Lib Dem greenery.

So don’t rage about your gas bill this winter, but shout at your MP about the need for a realistic long-term energy strategy. And call on your elderly neighbours, to make sure they’re keeping warm.